There’s a comprehensive special report on social networking in this week’s Economist.

Among the discussion is an excellent article called Privacy 2.0. It outlines the incentives for social networks to advocate privacy (attracts users and builds trust) and to undermine it (a drop in demand for privacy would enhance the networks’ abilities to make money).

It did make me think, once again, that it is a bit rich to hear the people running Facebook or Twitter saying things like social norms are changing, or there is a long-term shift towards people being more open about their personal information. It is the equivalent of estate agents urging that house prices are more likely to go up than down: it might be true, but you wouldn’t take their word for it, would you?

A world of connections

Online social networks are changing the way people communicate, work and play, and mostly for the better, says Martin Giles (interviewed here)

Jan 28th 2010 | From The Economist print edition

Illustration by Ian Whadcock

THE annual meeting of the World Economic Forum in Davos, currently in progress, is famous for making connections among the global great and good. But when the delegates go home again, getting even a few of them together in a room becomes difficult. To allow the leaders to keep talking, the forum’s organisers last year launched a pilot version of a secure online service where members can post mini-biographies and other information, and create links with other users to form collaborative working groups. Dubbed the World Electronic Community, or WELCOM, the forum’s exclusive online network has only about 5,000 members.

But if any service deserves such a grand title it is surely Facebook, which celebrates its sixth birthday next month and is now the second most popular site on the internet after Google. The globe’s largest online social network boasts over 350m users—which, were it a nation, would make Facebook the world’s third most populous after China and India. That is not the only striking statistic associated with the business. Its users now post over 55m updates a day on the site and share more than 3.5 billion pieces of content with one another every week. As it has grown like Topsy, the site has also expanded way beyond its American roots: today some 70% of its audience is outside the United States.

Although Facebook is the world’s biggest social network, there are a number of other globetrotting sites, such as MySpace, which concentrates on music and entertainment; LinkedIn, which targets career-minded professionals; and Twitter, a networking service that lets members send out short, 140-character messages called “tweets”. All of these appear in a ranking of the world’s most popular networks by total monthly web visits (see chart 1), which also includes Orkut, a Google-owned service that is heavily used in India and Brazil, and QQ, which is big in China. On top of these there are other big national community sites such as Skyrock in France, VKontakte in Russia, and Cyworld in South Korea, as well as numerous smaller social networks that appeal to specific interests such as Muxlim, aimed at the world’s Muslims, and ResearchGATE, which connects scientists and researchers.

Going public

All this shows just how far online communities have come. Until the mid-1990s they were largely ghettos for geeks who hid behind online aliases. Thanks to easy-to-use interfaces and fine-grained privacy controls, social networks have been transformed into vast public spaces where millions of people now feel comfortable using their real identities online. ComScore, a market-research firm, reckons that last October big social-networking sites received over 800m visitors. “The social networks’ greatest achievement has been to bring humanity into a place that was once cold and technological,” says Charlene Li of the Altimeter Group, a consulting firm.

Their other great achievement has been to turn themselves into superb tools for mass communication. Simply by updating a personal page on Facebook or sending out a tweet, users can let their network of friends—and sometimes the world—know what is happening in their lives. Moreover, they can send out videos, pictures and lots of other content with just a few clicks of a mouse. “This represents a dramatic and permanent upgrade in people’s ability to communicate with one another,” says Marc Andreessen, a Silicon Valley veteran who has invested in Facebook, Twitter and Ning, an American firm that hosts almost 2m social networks for clients.

And people are making copious use of that ability. Nielsen, a market-research firm, reckons that since February 2009 they have been spending more time on social-networking sites than on e-mail, and the lead is getting bigger. Measured by hours spent on them per social-network user, the most avid online networkers are in Australia, followed by those in Britain and Italy (see chart 2). Last October Americans spent just under six hours surfing social networks, almost three times as much as in the same month in 2007. And it isn’t just youngsters who are friending and poking one another—Facebook-speak for making connections and saying hi to your pals. People of all ages are joining the networks in ever greater numbers.

Social-networking sites’ impressive growth has attracted much attention because the sites have made people’s personal relationships more visible and quantifiable than ever before. They have also become important vehicles for news and channels of influence. Twitter regularly scores headlines with its real-time updates on events like the Mumbai terrorist attacks and on the activities of its high-profile users, who include rap stars, writers and royalty. And both Twitter and Facebook played a starring role in the online campaign strategy that helped sweep Barack Obama to victory in the presidential race.

Delivery time

But like Mr Obama, social networks have also generated great expectations along the way on which they must now deliver. They need to prove to the world that they are here to stay. They must demonstrate that they are capable of generating the returns that justify the lofty valuations investors have given them. And they need to do all this while also reassuring users that their privacy will not be violated in the pursuit of profit.

Illustration by Ian Whadcock

In the business world there has also been much hype around something called “Enterprise 2.0”, a term coined to describe efforts to bring technologies such as social networks and blogs into the workplace. Fans claim that new social-networking offerings now being developed for the corporate world will create huge benefits for businesses. Among those being touted are services such as Yammer, which produces a corporate version of Twitter, and Chatter, a social-networking service that has been developed by Salesforce.com.

To sceptics all this talk of twittering, yammering and chattering smacks of another internet bubble in the making. They argue that even a huge social network such as Facebook will struggle to make money because fickle networkers will not stay in one place for long, pointing to the example of MySpace, which was once all the rage but has now become a shadow of its former self. Last year the site, which is owned by News Corp, installed a new boss and fired 45% of its staff as part of a plan to revive its fortunes. Critics also say that the networks’ advertising-driven business model is flawed.

Within companies there is plenty of doubt about the benefits of online social networking in the office. A survey of 1,400 chief information officers conducted last year by Robert Half Technology, a recruitment firm, found that only one-tenth of them gave employees full access to such networks during the day, and that many were blocking Facebook and Twitter altogether. The executives’ biggest concern was that social networking would lead to social notworking, with employees using the sites to chat with friends instead of doing their jobs. Some bosses also fretted that the sites would be used to leak sensitive corporate information.

This special report will examine these issues in detail. It will argue that social networks are more robust than their critics think, though not every site will prosper, and that social-networking technologies are creating considerable benefits for the businesses that embrace them, whatever their size. Lastly, it will contend that this is just the beginning of an exciting new era of global interconnectedness that will spread ideas and innovations around the world faster than ever before.

That was almost certainly one of the most promoted releases in the UK in 2009, yet it was ultimately pipped by Killing In The Name by Rage Against The Machine after a social media campaign that was probably skillfully – i.e. quietly – encouraged by the record label.

Social media is becoming such an important part of music promotion, it may be close to becoming more effective than traditional promotional activity. A band I know, Georgia Wonder, are amazing at promoting their music entirely via social media. They even funded their most recent single, Destroy, via Twitter. Remarkable, and brilliant.

I’m now really looking forward to another of my favourite bands, Archie Bronson Outfit, to see how well they can leverage their large MySpace and Facebook followings. Their new videos (totally home-made by the band members) look superb. Here is their trailer:

(Disclaimer – I also know Archie Bronson Outfit, though the only personal gain I can expect by promoting their new videos is – if I am VERY lucky – a pint at some point).

On watching this interview, I was struck by the naivete of Mark Zuckerberg’s view of the world.

The Good

Zuckerberg, the 25-year-old CEO of Facebook, argues that privacy is ‘no longer a social norm’. It’s an interesting proposition, and one that deserves exploration. Are people’s views of privacy changing? Was privacy ever a ‘social norm’, and if so what does that mean? Is there evidence now that public views of privacy have changed?

Interesting questions.

The Bad

The problem is that these are not simple quesions, and it is unclear whether Zuckerberg’s view is based on anything more than his particular 25-years’ experience. The closest thing he has to an argument is this:

When I got started in my dorm room at Harvard, the question a lot of people asked was, ‘why would I want to put any information on the internet at all? Why would I want to have a website?’. Then in the last 5 or 6 years, blogging has taken off in a huge way, and just all these different services that have people sharing all this information.

It’s not an argument, it’s a personal anecdote, followed by a platitude about the growth of blogging and ways to share information online, reaching a conclusion about the views of all the people, presumably, in the world.

Zuckerberg’s argument is further flawed because it is so obviously self-serving. In a way, no matter the validity of what he is saying (and it is not valid), he of all people just can’t credibly say it. If Facebook wants to make this case, it should find ways to come across as objective. Let others say it, perhaps, or provide evidence.

The Ugly

Facebook’s decisions about my privacy, which are taken from time to time without my permission, are simply out of my control. That is not the same as my not expecting privacy – which is what Zuckerberg is implying by his statement about social norms. Perhaps he has some evidence that paints me as abnormally focused on privacy. If so – let’s see it.

The long-term issue here is trust. The more Facebook fosters distrust among its users, the sooner they will leave at the first genuine opportunity. Don’t get me wrong – Facebook currently is the best platform in the market for doing what it does. But it won’t be forever, and it’s popularity can disappear as quickly as it has grown. Time to go back to having a ‘beginner’s mind’, Mark, and start listening.

An interesting map has just been published as part of the Global Web Index – a project measuring the use of social media around the world.

There are some real highlights here. For example, the survey of 32,000 web users in 16 countries shows that, based on people uploading photos and videos, blogging, microblogging and using social networks, there are hundreds of millions of social web users around the world. That's a big number, and makes a compelling argument for big corporates and brands to take seriously the social web.

It also reveals a remarkable variation between web use in Asia and the rest of the world – blogging is big in most Asian countries, with 46% of Chinese web users blogging, versus 12% of Americans. A quarter of Indians use microblog services such as Twitter compared with 5% of Germans, Canadians and Brits.

Bad

The authors could really have done with improving their delivery. The research method needs more of an explanation – for example, the fact that these surveys were conducted online should be discussed, because such a survey will be self-selecting, with respondents more likely than the general population to be social web users.

And there is a confusing explanation of Japan's very low use of the social web. The authors put this down to the fact that this map is based only on PC access of social media, and excludes mobile access. That's a pity, because it would say much more if it was based on overall access to social media.

Ugly

The written English is full of mistakes. This is such a potentially powerful piece of research, that it is disappointing it is let down badly by poor English. Example: "The size of the arch's, represents the audience volume in millions." Actually, the size of the arches represents the size of each group in millions.

I am an advocate of digitising and socialising all media, not least because it would make journalism more sustainable, with lower distribution costs and higher audience engagement than is possible on paper.

But there is one strong argument for sustaining the print version of newspapers: the second-hand market. It is the very throw-away-ability of newspapers that means they can be used to start fires, cover furniture when painting the ceiling, pack fireworks, act as the collar inside cocktail umbrellas, or catch the falling flecks of boot polish that detach from the brush as you work your office shoes up to a shine.

And the most cherished use of all – I doubt you would be happy to see someone wrapping tomorrow’s fish and chips around your Kindle DX.

I like Malcolm Gladwell, but never more than this week, after reading his critique of Chris Anderson’s new book Free: the future of a radical price. These two journalistic heavyweights have had a public debate that I will try and sum up in two lines:

Anderson: there is one iron law of the information economy – in the end, all information will be free

Gladwell: if there is a law of the internet age, it is that there are no iron laws – and the notion that everything can be free is wrong

In a book review in The New Yorker, Gladwell eloquently and satisfyingly pulls apart Anderson’s arguments. So far, Anderson seems unable to fight back. His response, posted this week at wired.com, is weak.

Reading Gladwell’s article and Anderson’s response is worth doing, if only to see how one-sided this argument is. But I wanted to draw out a slightly different conclusion from Anderson’s argument – and one that perhaps hints at the solution to the problems caused by the free web.

I can’t read Free, as I am not a book reviewer [and it’s not published until next week]. However, back in 2007, Anderson wrote a precursor to his book – an article in The World in 2008 (published by The Economist), entitled “Freeconomics: there really is such a thing as a free lunch” [subscription required].

I was pretty inspired, as I liked Anderson’s general theorising in his 2006 book The Long Tail and figured, here’s a guy not afraid to look at things in a new way. But the difficulty was, as I read, it became clear his article was full of non-sequiturs. Here’s one:

“The cost of storing or transmitting a kilobyte of data really is now too cheap to meter” therefore the transmission of data is/will be free

Contrary to Anderson’s conclusion, it struck me that the anomaly here is not the falling cost of data transmission, but our present inability to measure tiny quantities of value, or cash. You could call it the problem of quantum finance. To follow a quantum physics parallel, the idea is that every cash payment really consists of tiny financial quanta. That is not so weird, as that is how money works – we call them cents, or pence – but the problem is that we need smaller units. We need financial quanta.

Today, we only have the means to measure financial quanta when they stack up into great amounts (like dollars or pounds). But if we can develop a system for measuring financial quanta practically, that is when the economy of information will begin to function properly.